Oxley

The Sarbanes-Oxley Act of 2002 protects whistleblowers by providing both civil remedies (Section 806) and criminal penalties (Section 1107) against those who retaliate against them. It was passed by U.S. Congress on July 30, 2002. The Act was created in response to accounting malpractice in the early 2000s.

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Sarbanes-Oxley Law was created on the initiative of two US Congressmen Paul Sarbanes and Michael Oxley, after a well-known series of corporate scandals such as Enron and WorldCom. The Sarbanes-Oxley laws have become mandatory for everyone companies whose shares are listed on any stock exchange in the US, and their purpose is to introduce them effective internal control system for the financial reporting process.

SOX gives the Department of Labor first crack at handling complaints brought under Section 806 by whistleblowers who believe they are the victims of unfair retaliation. Last month the Occupational Safety & Health Administration (OSHA) of the Department of Labor announced the publication of its interim final rules for handling these whistleblower complaints.

So, what happened?

As discussed in “Blowing the Sarbanes-Oxley Whistle,” an article by Ashlea Ebeling posted yesterday on Forbes.com, employers may be surprised by the rapid responses required under OSHA’s interim final rules. Employers and any other persons named in a whistleblower’s complaint will initially have only 20 days to respond to a whistleblower’s complaint before OSHA decides whether to begin an investigation.

If OSHA’s investigation suggests that the claim has merit, OSHA will give the employer and other named persons another 10 days to try to present clear and convincing evidence that the claim is without merit. If OSHA nevertheless determines that the claim has merit, the employer and other persons named in the complaint would then have another 30 days to file any objections and request a hearing in front of an administrative law judge. Translation: a lot of work must be done very quickly in order to head off these whistleblower complaints.

And there is more…

What makes this pressure cooker even more daunting is that Section 806 of SOX permits these whistleblower complaints to name not just the employer, but also any “officer, employee, contractor, subcontractor or agent” of the employer, each of whom may be held individually liable to the whistleblower. If you are concerned that this high-pressure high stakes system may encourage whistleblowers to file frivolous claims or otherwise act in bad faith, you may take some solace from OSHA’s ability to award “a reasonable attorney’s fee, not exceeding1 thousand American dollars to employers and other victims of whistleblower complaints held to be frivolous or filed in bad faith. Then again, unless you know a skilled labor lawyer who bills at 5 American dollars per hour, you probably won’t.